By Fabio
Benedetti-Valentini and Mark Deen
The French are
crying foul.
A potential $10
billion U.S. penalty against France’s largest bank BNP Paribas SA (BNP) for its alleged dealings
with Iran and other sanctioned nations is stirring outrage in the country.
It is putting pressure on President Francois Hollande, who hosts Barack
Obama this week to mark the 70th anniversary of D-Day, to protect the
bank from the American onslaught.
Le Monde in its May 31 edition called the possible fine a “masterful
slap.” Le Figaro newspaper said the U.S. was making an example of BNP to
deflect criticism it had been “lenient with the American banks responsible for
the financial crisis.” Hollande will discuss BNP with Obama on June 5 when the
presidents meet in Paris, a French official said today.
U.S.
authorities are seeking to impose the fine to settle allegations that BNP
transferred funds for clients in violation of sanctions against Sudan, Iran, and Cuba, according
to people with knowledge of the investigation. The fine could be the largest
criminal penalty in the U.S., eclipsing BP Plc’s $4 billion accord with the Justice Department last year.
“If this
results in a guilty plea, it is likely to increase debate in France and the
rest of Europe about the essential fairness of U.S. criminal procedures,” said
Frederick T. Davis, a lawyer at Debevoise & Plimpton LLP in Paris and a
former U.S. prosecutor.
Culled from bloomberg.com
U.S.
‘Racketeering’ in BNP Fine
Hollande, who
during his 2012 campaign described the world of finance as “my real enemy,” is
now under pressure to seek leniency for BNP. The right-wing National Front,
which beat France’s two mainstream political parties in the May 25 European
parliamentary elections, on May 30 called on the government to “defend the
national interest” in the case.
In a statement
on its website, the National Front accused the U.S. of “racketeering,” in an
effort to weaken BNP and aid its American rivals. “We demand that the French
government not stay idle,” the statement said.
France’s
central bank has said the transactions did not violate French or European laws.
The U.S. is claiming jurisdiction because the transactions were processed in
dollars.
“This affair is
part of Washington’s hegemonic ambition in law and commerce,” said Jacques Myard,
a lawmaker from former President Nicolas Sarkozy’s UMP Party. “Washington has
the annoying habit of trying to apply its laws outside its jurisdiction and use
its strength for commercial ends.”
The French
government hasn’t been involved in the U.S. discussions over Paris-based BNP
and views the case as a legal matter that must follow its own course, three
people familiar with the government’s position have said. The French Finance
Ministry and BNP have declined to comment on the case.
GE-Alstom
The BNP case
isn’t the only source of commercial tension between France and the U.S. French
officials led by Economy and Industry Minister Arnaud Montebourghave sought to
block General Electric Co.’s proposed $17 billion acquisition of the bulk of
France’sAlstom SA (ALO), instead
supporting a counteroffer from Germany’s Siemens AG.
In the matter
of BNP, French officials are acting behind the scenes, Jean-Marie Le Guen,
minister in charge of relations with Parliament, said yesterday.
“Megaphone
diplomacy is not what’s called for here,” Le Guen said on BFM television. “The United
States can’t treat its allies like this.”
Bank of France
Governor Christian
Noyer said last month that all of BNP transactions “conformed with
European and French laws and rules.”
The largest
U.S. settlement for doing business with sanctioned countries was in 2012, when
the U.K.’s HSBC Holdings Plc agreed to pay $1.9 billion.
Little
Leverage
“There is just
one way and one way only to deal with this type of investigation -- it’s
maximum cooperation from day one. Anything else is an error,” said Simon
Maughan, head of research at financial-analysis firm OTAS Technologies
in London. “The point is that if you use dollars and make dollar transfers,
you’ve got to play by U.S. rules.”
BNP says it’s
cooperating with investigations and taking steps to change its practices. Chief
Executive Officer Jean-Laurent Bonnafe told shareholders at the company’s
annual general meeting last month that its own review focused on transactions
“that took place between 2002 and 2009.”
U.S.
prosecutors argue that a more severe penalty against BNP is justified because
the misconduct was more egregious and the bank didn’t fully cooperate with the
investigation, a person with knowledge of the matter has said.
BNP’s leverage
in the case is limited, because it risks suspension of its U.S. banking
license. The bank has a large corporate and investment banking operation in the
U.S. and owns BancWest, which operates retail branches in California and about 20 other Western
and Midwestern states, according to its website.
Escalating
Fine
The amount of
the fine has risen. BNP said in April that it might need to pay far more than
the $1.1 billion it had already set aside for the case. A $10 billion fine
would be almost equal to the bank’sannual profit. While Moody’s
ratings service said on May 29 that BNP could “handle a large fine” without
denting its credit
rating or hurting liquidity, it warned in a note to clients that the
company faced a risk of “client defections and lost revenue.”
BNP has slumped
9.8 percent in Paris trading this year compared with a 5.1 percent advance in
the benchmark CAC 40 index. It slid 0.6 percent to 51.08 euros today.
Authorities in
the U.S. first heard about possible wrongdoing by BNP around 2007, when an
informant contacted the Manhattan District Attorney’s office, according to two
people with knowledge of the probe who asked not to be identified because the
matter is private. About a year later the bank came forward with its own
findings and views itself as having self-reported, two other people said.
Project
Mars
While BNP’s
efforts to clean up its operations were focused on a unit in Geneva that
structured deals to move oil and other commodities around the world, people
familiar with the investigations on the U.S. side said the transactions being
probed weren’t restricted to the Swiss city.
About 30
executives who worked at BNP’s energy and commodities finance unit in Geneva
and Paris have resigned, gone on leave, been fired or relocated since 2012,
three people with knowledge of the staffing said last week. The review was
known internally as Mars, the people said.
BNP said in
2011 that it was reviewing operations to see how they complied with the Office
of Foreign Assets Control’s rules after talks with the U.S. authorities.
U.S.
Sanctions
Societe Generale SA (GLE) and Credit Agricole SA,
respectively France’s No. 2 and No. 3 banks by market value, have said in their
filings this year that they are each making internal reviews and are
cooperating with U.S. authorities over dollar transactions involving embargoed
countries.
The U.S.
imposed sanctions against Iran in 1979 and Sudan in 1997. As members of the United
Nations, France and Switzerland follow sanctions imposed by
that body, and often those by the European Union, though Switzerland isn’t part
of the EU. Both adopted some controls on dealings with Sudan in 2004 and with
Iran in 2007 and expanded them in later years.
BNP may have
breached U.S. sanctions because the deals were cleared in dollars from accounts
in the U.S., two people with knowledge of the investigation said. Some
unauthorized dollar payments were made on behalf of oil
companies to Sudanese or Iranian
entities, a former employee said.
In spite of the
possible wrongdoing, some in France say the penalty against the bank is
disproportionate. Former French Trade Minister Pierre Lellouche said in Le
Monde that it was “shocking and exorbitant.”
“It would be
unacceptable for the French government to do nothing at a time when the
European Union is negotiating a free-trade accord with the U.S.,” he said.
Culled from Bloomberg.net
No comments:
Post a Comment